The law I authored, entitled “Your Customers Expect You to Make Them Wildly Successful” has become even more of a reality since I wrote it. The more I engage with sophisticated, successful, enterprise customers, the more their expectation (rightfully so) is that we not only provide them with a product, but that we provide them with the expertise, guidance, and, yes, tough love, that it takes in order to ensure success. In the subscription economy, we’re all stakeholders in our customers’ success.

I’ve re-published the law I authored below:

Customers don’t buy your solution to use its features and functions. They buy your solution (and buy into the relationship with you) because they want to achieve a business objective. Just as sales organizations are using a “Challenger” sales approach, Customer Success organizations need to provide new insights and challenges. As Ben Horowitz said in his 2015 commencement address at Columbia University: “There’s no value in telling someone what they already know.”

The value your customer places in your relationship isn’t defined only by your product’s features and functions; it’s also defined by everything else your company does to help make your customers better at what they do. That includes enablement, content marketing, online resources, and in the case of relationships with larger enterprises, direct engagement by subject-matter experts. In some cases, delivering a message that goes against conventional (and popular) wisdom can be difficult, but in the end, delivering a challenging message that is in your customer’s best interest will strengthen your relationship

Delivering wild success requires you to understand three fundamental things:

How is your customer measuring success? In other words, what is the customer’s unit of measure (time saved, incremental revenue, reduced cost, specific financial impact of increased quality), and what results does the customer need to declare victory?

Is the customer achieving that value (or at least on a realistic path to achieving it)?

What’s the customer’s experience with you along the way?

Wild success doesn’t happen by chance. It happens because both you and your customer have a real stake in mutual success, you both share and understand those objectives, you measure and monitor progress against those objectives, you ask hard questions, and you continuously strive to raise the bar when setting new objectives.

The truth is that it takes more than a great product to make your customers successful. In the enterprise, you’ve won the deal because your sales team has done an outstanding job of selling the benefits of your company, painting a vision, and setting expectations that there will be significant payback with your solution. In a recent customer meeting, a forward-thinking CIO expressed to me his concern with many software vendors: “None of them challenge us. They come in, install the software, and then move on. I’d like to understand what we’re currently doing that we should be doing differently. We’re not just paying for a product—we want expertise as well.” In a sense, he was telling us: “You sold us on vision and expertise. That’s our expectation. Now deliver.”

Unless you can start by delivering some value quickly, while executives are still excited, you risk losing momentum and falling into a pit in a success curve that resembles the “Trough of Disillusionment” in Gartner’s Hype Cycle.

With early proof points, your customers’ perception of success will be on a much flatter curve:

In addition to ensuring that you’re tracking to ultimate success for your customer, set your customers up for a quick win. Define an initial milestone and track that time to first value (shown in the chart above as “Phase 1 Value”). It may be as simple as delivering an initial proof of concept with basic functionality, but it will quickly provide evidence to your customer (both your immediate sponsor as well as executives or board members) that the decision to go with your technology was a good one. It’s also important to prove value quickly, since any expansion plans you may have with the customer will be predicated on your success. Early wins keep that momentum going. An early win will also be extremely helpful if you encounter any challenges (technical, business, environmental, or political) in future phases. It will allow your sponsor to point to the value already achieved as a way to flatten obstacles and rally support.

Installing software on-premises, provisioning a user account for a SaaS solution, or even providing basic training on the functionality of your product are simply table stakes. Those activities get you in the game, but they aren’t what make you win. If your company innovates—and which successful ones don’t?—it’s important that you outwardly communicate the benefits of that innovation and, critically, how your customers should use your capabilities to be more effective at what they do. Great companies need to provide this expertise and guidance in a way that scales. It isn’t just about having highly skilled professional services consultants who come in on a feefor-services basis (although that’s very important when serving the enterprise, as well as some subset of highly technical solutions). You’ll also need great content (knowledge base, best practices, how-tos) and an efficient means for delivering it.

The main reason why your customer bought your product in the first place isn’t because your features are cool. It’s because your customer has a job to do and expects your solution (and your company) to help them do it better. For example, if your company provides a digital marketing solution, you need to provide the tools, technology, training, and supporting content to make your customers better digital marketers, not just a tool that allows them to send emails. More importantly, you need to continuously provide the customer with examples of how they can use your solution to be more effective, how other customers are using it to be more effective and, if you have the aggregate data, how some of the customer’s key metrics (usage or otherwise) compare to similar companies or industry averages. Without a benchmark of comparison or a target to achieve, the customer’s current performance data has limited value.

To Help Your Customers Become Wildly Successful, You Must First Understand What Success Means to Them

To manage your customers through the journey of wild success, you always need to know three things about them:

How are they measuring success? Specifically, what is the key metric, or “unit of currency,” that they’re using to measure success, and how many units will the customer need to add/save/remove/reduce to claim that they’ve gotten value from your solution? You should also know how the customers as a team (irrespective of your solution) are being measured for performance.

According to that metric (or metrics), are they achieving success? Or, if it’s a work in progress, is the customer on track to succeed within to the expected time frame?

What is their experience along the way? While the first two questions are pretty clear-cut and quantitative, this one is less so; however, it is incredibly important. It will drive the tone of your relationship and interactions with your customers. Even if your customers achieve their objectives using your technology, if their experience is painful and requires more effort than they believe is necessary, then you’ve significantly increased their cost (both tangible and intangible) of achieving success.

ROI Isn’t a Concept; It’s an Equation

Another area that receives intense focus during the sales cycle but may fall through the cracks after implementation is the quantification of ROI. If you’re a provider of Customer Success solutions, your customers might have the following objectives:

Reduce churn

Find upsell opportunities

Improve the ability to scale their team

While it is difficult to attribute the degree to which your solution is helping the customer achieve each of the three preceding objectives, the first thing to do, if possible, is quantify the expected results. For example, reduce churn by how much? Identify how many new upsell opportunities, and of what size? How much total value? How much productivity gain do you expect to see in your team? How do you measure productivity? Is there a way that you can tie use of the product (or particular features of the product) to team scalability? Can you identify a few key metrics associating health scores for a certain percentage of customers in a certain tier as a point of first value? After you understand the expectations, set them as a clear target.

Get on a Cadence and Track Your Progress

Use regular business reviews (with your higher-touch customers) as a way to track progress toward the objectives and targets you’ve jointly defined. If your customers understand that you have a vested stake in their success and you share a common objective with them, they’ll be willing to engage with you on a regular basis to collaborate on how they can get there. Regular strategic business reviews (SBRs), quarterly or otherwise, focusing on these objectives give you and your customers a reason to engage on a regular basis. These objectives also help frame the conversation for a business review. I’ve seen too many quarterly business reviews (QBRs) poorly attended because they weren’t working toward clearly stated and understood success criteria. Product road map updates and a review of open support cases will carry a QBR only so far. In fact, a QBR that covers only those topics is extremely defensive. There’s no way for you or your customer to win if all you’re talking about are features that don’t yet exist and features that aren’t working properly.

A business review must be part of a broader context of a journey to well-understood success. If you have a clear understanding of the customer’s success criteria, then at the end of each SBR, you should be setting measurable objectives for the next one. I met with a customer recently who has an objective to migrate billions of rows of data to a new repository within the next two months using our product. While our CSM is going to have a number of conversations in the interim to ensure that the customer achieves that goal, the larger team is certainly going to review progress against that quantifiable objective in the next QBR.

Success Isn’t a Destination; It’s a Journey

While your customers may have set out initial success criteria, part of the value you bring as a partner is helping customers define what they should think about next. You know and understand the value your product can potentially bring to your customers. You also know how other customers are using your product successfully. This is a perfect opportunity for you to give your customers guidance about what they should be thinking about next. If they just used your Customer Success automation product to increase their retention rates from 85% to 88%, you now have an opportunity to show them how best-in-class companies are achieving 90%+ renewal rates—and how your partnership can help them get there. For lower-touch customers, you can achieve this objective through content marketing and communication of online best practices. For higher-touch customers, this can (and should) be an opportunity for executive alignment. It’s an opportunity to influence each other’s strategy, as well as an opportunity to strengthen the relationship. A good tool to use to help drive customer direction beyond first value is an effectiveness model that you can use to set objectives and timelines to help your customers better achieve their business objectives via your partnership.

In Theory, There’s No Difference between Theory and Reality—But in Reality, There Is

All this sounds great in theory. However, unless you have perfect alignment and agreement on everything throughout your customer relationship (starting with the sales process), you’re going to have cases in which customers won’t come to the table, won’t provide you with key data, will be challenging and confrontational, and may have a different understanding and set of expectations than you do—possibly thanks to an overly optimistic sales effort. You may run into challenges with your product. Your support or services organization may not always deliver impeccable service. All I can say is: Welcome to Customer Success. These are all challenges that you have to deal with, and you must have difficult conversations as soon as possible when issues arise. Issues won’t go away by themselves. Customers, however, will.

Approached properly, these conversations are, at minimum, incredible learning experiences. The best perspective for your company to take is to look at itself through the lens of your customer. No matter how hard you try to imagine how your customers feel about something or what they think, you won’t know until they tell you. Candid customer conversations are a valuable source of information—sometimes epiphanies—for your company.

Challenging times are also a great opportunity to cement a relationship. I have heard it said that the strongest steel is forged by the fires of hell. If you’ve worked through a difficult situation collaboratively with a customer and shown your true colors as a partner; or if you’ve accepted responsibility, identified short-term milestones— then met those milestones—regained trust, and made your customer successful, then you’ll understand and empathize with this statement. If customers aren’t following through on their side of a commitment, then you’ll need to escalate, strategize with your sales team or other business functions, and figure out how to have the necessary difficult conversation with the right person or people. Customer Success is everyone’s responsibility. Use all the resources available to you. Your customer is expecting you to.

It’s true that customers expect you to make them wildly successful. It’s also true that they’re highly motivated to be wildly successful with you. In fact, they’re at least as big a stakeholder in your mutual success as you are. Your customers are demanding because they want to be successful. Challenging your customers isn’t always an easy task. It requires a relationship, mutual respect, and a sense that you both are working toward the same objective. A customer told me recently at a dinner meeting: “The challenge you posed to us was difficult for us to process and accept. We initially took offense that you, in essence, were telling us that we were wrong, and that caused some tension. Ultimately, however, because we felt that you were in the same boat with us, we accepted it. As a result, it has strengthened our relationship.”

Customer feedback about your opportunities for improvement isn’t always as obvious as an escalation or challenge. In most cases, you need to be paying attention to the more subtle clues that there may be risk to your customers’ success. Many times, those clues are in what they don’t say rather than what they do say. Risk might be indicated by a change in schedule or priorities. In any of these cases, it’s critical to get to the root cause of the issue and understand what course corrections you need to make to drive Customer Success.

Remember, your customers aren’t buying a technology. They’re buying a solution to a problem, a path to a better way. It’s your responsibility to understand the customer’s goals and objectives and steer the customer along that path (in both high-touch and low-touch ways). Once you’re able to understand how customers are measuring success, confirm that they’re achieving it, and confirm that they’re having a positive experience along the way, you’ll have the most valuable thing possible: an advocate. And in a world where social media and the network are accelerants that help both negative and positive opinions spread like wildfire, advocacy is priceless.

In combination, the Challenger Sale methodology and the rise of content marketing have created an environment in which customers expect that they have purchased more than just a product to use. They’ve entered a relationship with a company that is going to make them more effective at achieving their business objectives. As a result, the CSM (as well as the entire customer-facing team) need to grab the baton and take on the role of challenger throughout the customer life cycle. Wild success doesn’t happen by chance. It happens because someone asks hard questions, objectives are measured and monitored, and once those objectives are achieved, someone raises the bar and repeats. Welcome to (wild) Customer Success.

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Customer Success is about proactively managing a customer relationship towards demonstrable value… and creating a great experience in the process. As anyone who has ever had the responsibility for doing this can attest, it takes more than just a CSM team to be successful. You’ve heard people talk about “a culture of customer success” or “a customer-centric company”, and while much of what it takes to win and be successful is empathy for and an understanding of the perspective of the customer, those can be pretty empty words without a way for the whole organization to put the philosophy into action.

In order for a company to help its customers achieve success, every part of the organization needs to engage… and deliver, but how do you do it in a way that scales?

As in many subjects related to Customer Success there is no one answer that fits every situation. The subscription economy is continually expanding and evolving, and what it takes to make an enterprise B2B customer successful can be very different than what it takes to make a large number of B2C customers successful. The model in this article can be applied to a number of different products and industries and is offered as a framework to ensure that different functions in your company are thinking about the success of your customers from every aspect of their experience.

As a software solution provider, you are no longer expected to just deliver a product. Your customers expect you to help make them better at what they do as a result of doing business with you, but it isn’t reasonable to think that hiring a bunch of CSMs is going to be either a scalable or an effective way of making that happen. In fact, if you’re expecting the success of a company and the satisfaction of your customers to be completely on the shoulders of your CSM team, then you’re setting yourself (and your CSM team) up for failure.

So how do you implement a culture of customer success across your organization?

A CSM can play many roles in the customer relationship. At any point in time, a CSM can be a number of things in a customer relationship:

A rudder – to steer the customer relationship in the right direction;

A thermometer – to truly understand the customer’s temperature,

A subject matter expert – who can provide guidance to a customer,

A relationship broker – who can connect the customer with the right resources inside the company in order help them be successful. These can be resources from product marketing, professional services, support, finance, or any other department

But actually delivering the value and making the customer successful takes much more than a CSM.

In fact, in many companies, the customer success organization doesn’t have a deep relationship with every customer, and in all companies, it isn’t the most scalable way to impact the customer experience (you do have a product, after all).

A pyramid provides a very effective model for how different aspects of what you do can influence the success of your customers, On the bottom of the pyramid, as a true foundation, are the components that scale the best, primarily because they are upstream in the user experience and reach the broadest audience. As you move up the pyramid are components that don’t scale as well; however they provide immense value to the subset of customers who need (and use) them.

I wouldn’t argue that any of these is more important than another, and each type of product (consumer, SMB, enterprise) will have a different Customer Success pyramid, or will have different dependencies on different layers of the pyramid. In some companies and for some products, the specific levels of the pyramid may differ, and in consumer products, some levels may not even exist. The diagram I show here is designed for delivering Customer Success to B2B customers. A consumer-only product will likely not have a Professional Services component to it; however as even some “consumer” products are moving into the B2B space, they’ll need to add less scalable, and more specialized offerings in order to make their higher value customers successful.

Here’s a breakdown of the Customer Success Pyramid layer-by-layer:

1. Product

Customer Success starts with your product: It fundamentally has to work well; it must do what it is supposed to do; and it must do it in a way that ensures adoption of the features that truly differentiate you and will make your customers sticky. As your organization learns from customers, you need to ensure that you’re getting that feedback into your product. Every layer above this in the pyramid will only deliver incremental value to what your product offers, and if there are fundamental deficiencies or usability issues with your product, then you are eroding the potential incremental value that those layers can deliver. I can’t stress the importance of this enough as I’ve seen and lived it in the real world. If your product has fundamental shortcomings, the time and effort of everyone else in your organization is spent on “propping up” your core technology. You won’t have the time and credibility to deliver incremental value. To some extent, no product is perfect, and the layers above will always help plug some gaps, but to the extent your product is intuitive and accessible, you can use the other layers to really provide a differentiated, service-oriented experience. It’s also important that you use every layer above Product in the pyramid to gather actionable information that will help you improve your product and the experience it delivers to your customers.

2. Documentation

Similar to the product, your documentation has the potential to touch every user… well, every user who can access it quickly and easily. Given the broad potential reach of documentation, it’s vital that your documentation is accessible, contextual, and modularized, with specific relevance to the part of the application or function that the user needs to learn more about. If your documentation isn’t easily accessible by your users *at the time and in the context in which they need it*, then many of them aren’t going to read it.

3. Training

Training material can take a number of forms, from multi-day customized on-site courses to short, focused, easy to digest, “how to” examples. Best in class companies have a range or training materials available and have implemented comprehensive LMS systems to gather feedback to understand which courses are providing the most value to customers. Course content should continuously be updated based on feedback gathered at higher layers of the pyramid. For example, if a significant number of cases are being opened related to system configuration, then your training team should be delivering additional modules around configuring the system. By creating those courses, you’ll not only be lowering the number of support cases that your support team has to deal with, you’ll also be creating a better customer experience by not having your customers face the issues at all. Your customers are telling you (via support) that parts of your application aren’t intuitive. The short term answer is to develop better training, the longer term answer is to make the product more intuitive.

As your training curriculum evolves, it should be about more than just your product features, it should also include best practices for using your product and should complement your content marketing. For example, if you provide a CRM solution, your training shouldn’t just cover how to create an opportunity on your platform, it should provide guidance on what information is relevant in an opportunity as well as how best in class companies manage opportunities and how they use that information to better understand their forecasts and predict their business. If developed properly, training material will also highlight strengths and differentiators of your product without coming off as additional sales collateral.

4. Online resources

This layer can really help your organization scale and should be monitored and updated constantly: both proactively based on what you want your customers to know; as well as reactively, based on what your customers are asking you and what they are consuming. Online resources can be updated many times per day by many people. These updates can be as involved as developing best practices derived from a large number of customer engagements, then formally publishing them; or as effortless as having a customer or partner respond to an open forum question. The analytics around online resources can provide incredibly valuable insights around what your customers are reading, talking, and thinking about.

Some online resources don’t even need to be owned or managed by your company. Participate in forums that your company doesn’t manage, but are relevant to your space. If you have a partner ecosystem, both you and your partners should be providing online content for each others’ sites. Many companies that provide solutions directly to consumers enable the vast majority of their customer success through these four layers alone, with the majority of content/investment/usage happening in layers 1 and 4 (product and online resources). By far, you get the most reach and scale from these first four layers as they’re all based on delivering functionality and content to your audience in a “one to many” model. Working with your Marketing, Customer Support, and Professional Services teams you can target and develop content that will be relevant for and specific to a number of different customer segments.

5. Support

While the first four layers of the pyramid may be sufficient for some consumer products, enterprise products require enterprise support. World class enterprise support requires both rich and relevant online content (layer 4), as well as a strong team that can help customers dig in to complex issues. Your team members in support need to have deep product and technical skills in order to provide your customers with resolution to their issues as well as “soft” skills to manage your customers through challenging situations. For a great resource on how to deliver a great customer experience via your Support team, I’d highly recommend Flavio Martin’s blog.

6. Subject Matter Experts

Generally CSMs fit one (or in some cases both) of two profiles: 1) a subject matter expert; and 2) a relationship manager. Assuming the relationship manager role transcends all levels of the pyramid, subject matter expertise delivered by people who know your product, the industry, and your customers can help ensure your customers are getting off on the right foot and that they’re not getting “stuck” along the way in their implementations. A common question I get is “how is this role different than what a company should offer in professional services?” The main difference is that this subject matter expertise is delivered in very small doses, sometimes reactively, and in many cases at no additional cost to the customer. An efficient Professional Services organization would have a hard time delivering this expertise without a negative impact on profit margins. Subject Matter Experts can also help position the value of a deeper, longer term Professional Services engagement as a result of their interaction with the customer.

7. Professional Services

Professional Services are a great opportunity to drive success with higher value customers. Those services can be delivered by both your internal PS team and an ecosystem of partners. Generally, I’ve found the best services to perform with your internal team (vs partners) are the ones that meet three criteria:

Services that your team can deliver successfully (this sounds obvious; however unless you’re really clear that the purpose of your PS organization is to drive subscription revenue in a way that is fiscally responsible, you can get caught up in trying too hard to indiscriminately drive Services revenue. As a result performing services that your company isn’t ready to do well);

Services that are instrumental to your customers’ success; and

Services which you can deliver while making sustainable profit margins and where you aren’t competing against low cost, “commodity” resources for a lower price.

While a professional services team needs to operate in a manner that contributes positively to the company’s margins, it’s fundamental purpose, if it’s part of a subscription software company, should be to drive the success, retention, and growth of your subscription customers. We measure our PS team’s performance not only on basic PS metrics, but also on delivery success, time to value, customer advocacy, and, yes, our renewal rates, because our PS team has significant impact on the success of our customers.

A common theme:

It may take a slightly different set of activities and roles to deliver success to your customers than the ones I’ve outlined; however a couple of fundamentals will hold true:

A) Your product is, without a doubt, the most scalable way to deliver a positive experience to your customer, so if you can take input from all of the other activities to ultimately improve the product experience, you will maximize impact and reach;

B) Product alone, CSMs alone, in fact, none of these layers by themselves can make customers, especially enterprise customers, successful. A culture of Customer Success needs to think about customer experience in the context of all of these layers. As you focus on your customers’ experience, try to think about it in the context of this pyramid. Socialize it with the rest of your leadership team. Share it with the rest of your company. Especially as your colleagues ask “what can I do to help improve the customer experience?”

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Proactive customer engagement. It’s a tenet of Customer Success. We all do it to some extent – some of us better than others. The question is “How do you best go about structuring that proactive engagement so that you can scale a team and provide a consistently great customer experience?” The answer is “With a good Customer Engagement Model.”

A good Customer Engagement Model needs to be flexible in two key ways:

It needs to accommodate different phases of the customer lifecycle; and

It needs to support both scheduled and unscheduled interactions with customers

In a prior article on Time to Value, I pointed out that it’s critical to keep momentum going once the initial sales deal is closed and ensure that you aren’t diverging from your customer’s original path to reaching their objectives. Your Customer Engagement Model should, therefore, start at the time of sale in order to maintain momentum and achieve a first “quick win”.

Good Customer Engagement Models should also help keep you focused on answering the three key questions you need to know about every customer:

How is our customer measuring value?

Are they achieving that value?

Are we providing an experience that will result in loyalty and advocacy?

Irrespective of whether your company provides high personal touch Customer Success or whether your Customer Success model is more self-service, your proactive engagement with customers should be governed by an Engagement Model. A good Engagement Model helps you understand: A) what the engagement “moments” are for customers throughout their lifecycle; B) who in your organization is responsible for interaction with customers at those moments; and C) what the objective or expected outcome is for each of those moments.

I’ve illustrated what that model looks like conceptually in the image below:

The Phases:

The first key point of an engagement model is that it needs to work across two very different phases of the customer lifecycle, the Onboarding Phase and the Ongoing Usage Phase. The first phase, onboarding, is the much higher intensity, much more critical, and much more interactive of the two. I think of these two phases very much like the takeoff phase and the cruise phase of airplane flight. In the takeoff phase you’re in close proximity to the ground, there’s quite a bit at stake, it’s the phase where more incidents happen, and it generally requires a high degree of pilot focus. During the cruise phase of flight, it’s important that pilots monitor their instruments, ensure they’re on course, and pay attention to external factors. They can’t ignore that they’re flying an airplane during the cruise phase; however the workload, intensity, and immediate consequences are lower than during the take off phase. Pilot’s don’t need to give the airplane nearly as much of their attention during cruise as they do when they’re screaming down the runway, getting it airborne, dealing with heavy air traffic, and monitoring for even the slightest anomaly – which could have dire consequences if left unchecked. During cruise, a pilot can leave the cockpit to use the restroom. During takeoff, on the other hand… not so much.

The Onboarding Phase:

The Onboarding Phase serves two purposes:

It ensures that your customers are getting off on the right foot and are set up for success with your solution; and

It creates a logical opportunity for both you and your customer to think about, articulate, and agree on how you’re going to measure value in the ongoing phase.

In a “high-touch” customer engagement scenario, much of the onboarding phase may be done by a CSM or someone from the customer onboarding or training team. The customer needs to become familiar with your solution during this phase, and you need to ensure that they’re able to be self-sufficient when using it.

A “low-touch” customer engagement scenario will have the same objective, but will achieve it more with automated marketing/email campaigns, automated measurement and exception handling of early adoption indicators, and automated training for the customer.

In both the high and low touch models, it’s critical to measure early indicators of user adoption and determine what course corrections need to be applied. The method for measuring the indicators and for communicating to customers needs to be much more automated in the case of a low touch engagement model.

In addition to ensuring adoption and self-sufficiency, the onboarding phase in a high touch B2B/Enterprise Solution world provides an opportunity for you to validate key assumptions with your customer on how they are going to measure value and how they’re going to quantify the success of their implementation of your solution. If your sales process is value based, you have probably already begun identifying use cases, measurements, and customer ROI expectations. You may very well have also quantified the expected ROI from adoption of your solution. The bad news is that too many companies don’t do any further measurement once the deal is closed. A good onboarding process not only ensures that a customer is adopting your product but positions you as a partner to help ensure they’re making progress against their stated objective.

Example Engagement Moments during the Onboarding Phase (some of which are included in the sample model above) include:

A kickoff meeting to ensure that the customer meets your team (either virtually or face to face, as appropriate)

Confirmation that the customer has dowloaded / activated / or logged in

Initial Product Training

A formal review of the first set of metrics delivered by your solution. These should provide an indication of the customers adoption, usage, and effectiveness (how well they are doing x, not just that they are doing x).

A checkpoint with the customer to ensure that they understand how the product works and that they feel self-sufficient

In the spirit of Time to Value, it’s vital during the onboarding phase that the process moves as quickly and efficiently as possible and that customer momentum is maintained in the process. I’d strongly recommend two things to manage momentum:

Once you have defined your Engagement Moments, measure the time that it takes each customer to progress from one to the other. Analyze your metrics and determine whether there are any systemic delays in any of your phases of onboarding and work quickly to get to root cause. I’ve had teams shave weeks off of implementation/onboarding by measuring individual phases, identifying root cause for the delays, and then fixing the process.

Set escalation triggers if you don’t see adoption events occurring with your customers according to expected timeframes during the onboarding phase. If your customers haven’t created x accounts in y weeks for example, that should trigger proactive engagement on your part – in addition to the predefined moments in your plan.

The Ongoing Phase

The focus of the Ongoing phase is to ensure that your customer is achieving the objectives identified in the Onboarding phase and that you’re keeping a pulse on their experience.

Engagement Moments in this phase can be categorized into one of two types: 1) Time-based; or 2) Event-based.

Time-based Moments

Time-based moments are ones that you can put on a calendar, such as a Quarterly Business Review, Monthly Metrics Review, Annual Account Review, or even Weekly Meetings for your highest of high-touch customers. Time-based moments are great ways to keep your customers interacting with you for the duration of the lifecycle – as long as you clearly set expectations and provide valuable feedback to them during those engagement points. If you aren’t continuously providing value to your customers during these moments, they’ll lose interest and stop attending regular calls/meetings, so be careful not to over-schedule them, and be sure to provide relevant engaging content in each of these engagements. Dan Steinman from Gainsight recently wrote an informative blog post characterizing a good Quarterly/Executive business review.

Event-based moments are ones that are triggered by the occurrence of an event (or non-event in some cases), such as a customer logging a high-severity case with your Support Desk; a new product release from your company; a change in leadership or executive sponsorship at your customer; a poor or mediocre survey response; an absence of support cases over a defined period of time; a decrease in overall usage; or a decrease in key usage metrics from a given customer. The purpose of event-based triggers is to help you react quickly and appropriately to events that can influence the health of the customer relationship – for better or for worse. In either case, the sooner your team reacts to the event that triggered the engagement, the better off you’ll be.

Customer Engagement Models are unique to companies, products, and customer types. An Engagement Model for an enterprise customer with a highly complex solution will look very different than one for a consumer with an off-the-shelf SaaS offering and both will engage different parts of the organization. Logically breaking down that model into two key phases (Onboarding and Ongoing) and defining the Ongoing phase in a way that supports both Time and Event-based moments of engagement with customers should help you optimize for your products and customer types. You will likely end up with more than one engagement model for different customer segments.

Have you employed a Customer Engagement Model and what methods or tools have you used to ensure that the model is consistently applied across your customer base?

I was recently in a meeting in Europe and found myself talking to an experienced enterprise sales leader from another company about Customer Success. She asked me “How do you approach Customer Success in different countries and cultures where there’s a need for face to face interaction? In the US you do so much by phone: Inside sales, Automated support, Customer Success Management, and here relationship building is still important. We need the face time.”

Which got me to thinking…

While I certainly don’t advocate running a high-touch, high-cost business model for customer success if the revenue model doesn’t support it, creating that personal relationship is incredibly powerful. As many US companies begin to expand their Customer Success efforts into other markets, it’s essential to recognize that each geography can provide some valuable lessons and examples for others. Organizations can learn quite a bit by exporting and importing best practices across regions. I’ve certainly learned by observing interaction models in different markets and applying best practices from one region to others. Taking this approach benefits both your company and your customers.

As you look at taking the “best of” from each of your regions, you’ll find that you can increase touch in some regions while increasing efficiency and scalability in others. As you dissect how and what to apply across geographies, it’s important to understand what makes each approach successful.

The Case for a Higher Touch Model:

Many of the effective Customer Success models outside the US are higher touch (more face to face) for a few reasons:

The culture dictates it;

In many countries it’s easier due to the higher concentration of businesses in fewer regional city centers

It works. As much as we do over the phone and online in the US, in some cases it’s still important to build personal relationships through face to face interaction.

So when the opportunity arises, it’s important to engage with customers in as personal a way as you can. In many cases, an in-person meeting with a large customer is a great investment of time and money. It also proactively sends the message that the customer is worth your time and effort.

Other Ways to Connect:

As our conversation progressed, we also agreed that it isn’t possible to meet every customer face to face, and it certainly isn’t possible to meet any customer face to face 100% of the time. In every case, though, it’s important to connect with your customers in a way that is A) relevant and appropriate to them; and B) true to your company’s brand and mission. For example, companies who do content marketing extremely well don’t need to have face to face interaction with the vast majority of their customer base in order to connect with them. Companies like MailChimp, HubSpot, and ZenDesk build incredible connections with their customers via mainly digital communications. Their messaging is so good and so authentic that as a customer you feel like you’re a connected insider.

Authenticity and Relevance Trump All:

Whether its face to face or through broader communication, you need to connect with your audience in a relevant way. You have quite a bit of information about each of your customers. Make your communication with them relevant, whether you’re targeting digital content based on their behavior or you’re tailoring a detailed Quarterly Business Review based on their specific metrics.

Even in the case of broader-based digital marketing or one-to-many communication, it’s critical to both create targeted content for your specific audience and to deliver that content in an engaging, authentic, personal way. I’ve attended webinars with solid content, but disconnected, impersonal presenters. In almost all cases, the disconnectedness of the presenter unfortunately trumped the relevance of the content.

Engaging with someone face-to-face, especially one-on-one (or few-to-few) inherently creates a strong connection. In the cases where you’re engaging digitally with customers en masse, you need to do so with a compelling, consistent tone and voice. Many of us will communicate with the largest segments of our customer base primarily through a digital channel. We have to make that channel engaging, personal, and authentic. Send the message to the group, but communicate with the individual.

Do something different

As you think about face to face meetings, it’s worth noting that not all face to face interactions need to be at your customer’s site. If your office is in a major metropolitan area, chances are your customers might find themselves in your neighborhood occasionally. If so, host them for a corporate visit. Do your quarterly business review with them in your offices. Introduce them to some of your executives who they wouldn’t otherwise meet if everyone needed to travel to the customer site. Share your vision with them. It’s easy for us to fall into routines with our customers, so by holding meetings in a different context or venue, you have the opportunity to create memorable experiences.

As you engage with your customers, how are your learnings and practices from one geography creating more personal, authentic, relevant, and memorable experiences worldwide?

Whether you’re facing explosive growth or trying to manage your Cost of Services as you build out your customer facing organization, you know that you are going to be faced with real-world resource constraints as you fund and build a Customer Success function. And after all, you’re a responsible leader and this is 2013, so you know better than to just throw people at a problem. So how do you efficiently manage growth in a Customer Success organization while effectively empowering your customers?

In my last post, A Practical View of Your Customers, I introduced an approach for understanding and mapping your customers by revenue using a Pareto chart. While I focused that article on how to look at your customer segments based on revenue, I’d like to focus this article on where to draw the line for each segment and why. If you haven’t read the previous post yet, I’d suggest doing so now. If you’re familiar with Pareto principles, my prior post certainly isn’t rocket science. You may still want to read it, though, as I’ll be re-using a chart I introduced there to illustrate my points.

Customer Segmentation and Engagement Models

The First, High-Touch Segment

Unless your company is a rare blue unicorn and you have a completely homogeneous customer base, you’re going to have some distribution of current and potential revenue across that customer base. Creating a Pareto Chart will show you which of your customers make up the largest revenue contribution. While my hypothetical (but not uncommon) example in my previous post showed a top tier segment where 10% of the customers accounted for 45% of the revenue, your results may differ – possibly significantly. It is almost certain, however, that a minority of your customers will account for a majority of your revenue and very likely that a small tier will account for a significant percentage (greater than 30%). If this is the case, you have a great opportunity to create a premium service offering via Customer Success that will focus on retaining and growing those customers.

This tier of customers is incredibly valuable. You can afford to (and need to) provide them with some attention, and ensure that you have great two-way communication in place in order to both guide them as well as learn from them. If you’re in the early stages of building your Customer Success team, I’d suggest this first cut at determining how to build out this team:

Think about the key activities that are required to ensure your top tier customers are getting value from your product

Understand how much of a person’s time it will take to provide those activities

Multiply that time by the number of customers you have in your top tier, and then staff accordingly, understanding that your CSMs will likely be able to spend less than 100% of their time on the activities you just defined

Note that this is a bit of an iterative process, and you’ll be doing a few “reality checks” as you understand how much time is needed for your customers – and as a consequence, how many people will be needed to deliver the experience you want your customers to have. There truly is a combination of art and science to this process, and if you can’t afford to hire enough resources to adequately service the group you’ve identified as your top tier, then you have three options:

You can redefine and reduce the size of that tier then only expand it once you can adequately staff to support a larger number of top-tier customers;

You can redefine (reduce) the level of service you provide to your top-tier customers; or

You can introduce automation (customer success automation, marketing automation) to assist the CSM in managing the customer relationship

How much service and effort you provide to each customer is going to be specific to your offering. Once you’ve done your calculations, you’ll likely want to perform a reality check based on the Book of Business each CSM is projected to be responsible for. I’ve seen organizations where each CSM has a Book of Business of as little as $1M of annual recurring revenue and others where that number is closer to $10M… or more. Metrics and “standards” are still all over the map on this topic and are really dependent upon your industry and the level of service you need to provide to your customers. Early stage, highly-technical solutions will require more CSM effort than later stage “commodity” solutions. Whatever stage or solution you’re at, though, be sure that you’re creating a role that is going to be sufficiently engaged to help your customers achieve value.

A Second, Hybrid Segment (Optional, but likely)

Depending on your customer distribution, you may want to define a second segment of customers who still represent significant revenue, but are probably closer to a 1:1 ratio of percentage of customers to percentage of revenue. In the hypothetical example I provide, the second customer segment represents 20% of the customers and 30% of the revenue. Again, your mileage may vary; however if you have a second tier of customers that makes up a sizeable percentage of your revenue, then you can (and probably should) identify a less intensive, but still personal, level of relationship with them (perhaps less frequent interaction than tier one and perhaps assisted even further by marketing automation). By doing this, you now have created personal relationships with two segments of customers that likely cover a majority of your revenue, but only a relatively small minority of your customers. My example in the last post shows 30% of customers representing 75% of revenue. While my example data is hypothetical, I’ve seen a number of companies within +/- 10% of these ratios, especially in the B2B space.

So how many CSMs should you assign to this space?

A good reality check for the number of CSMs to assign to this group is to use your Book of Business per CSM as the great equalizer. You may have CSMs in group 1 covering 10-15 customers and $3M in ARR. In Group 2, with smaller customers , a CSM might need to manage 50-75 customers to cover $3M in ARR. Automation will play a key role here to help identify customers in need, customers at risk, and to trigger targeted communications to customers at the right time.

The Third, Highly Automated Segment

While you’ve likely covered a majority of your revenue base in the first two segments, you still have a long tail (actually a very long tail in cases like freemium) of customers who are using your services but – at least for the time being – provide you with very little revenue. This customer segment is certainly important, both from a numbers, lead generation, and future revenue perspective; however you can’t afford to provide them with the same level of service you provide to customers who are paying orders of magnitude more than they are per month, so what does automation for this segment look like?

Whether this long tail represents 300 or 300,000 customers, you’re going to benefit greatly from an automation solution (or solutions) that help you:

Identify customer usage patterns

Identify at-risk customers

Send appropriate communications to those customers based on behavior, triggers, or their lifecycle

Keep your entire customer base engaged by helping you connect with them in a relevant way

While the long tail doesn’t represent a majority of your revenue, both this segment and your second segment are going to contain customers who represent incredible upsell opportunities – if you do some analysis that will help identify them. If you spend the extra effort up front, you can also leverage marketing automation to target relevant messages to those customers based on their behavior, activity, and other usage metrics.

If your strategy is to land and expand, you’ll need to look everywhere for the expansion opportunities, not just in the top tier. And if you’re using analytics, segmentation and automation appropriately, you can drive meaningful action with the right customers, whether they’re in your “top” tier or in your long tail.

A few months ago I wrote a post about customer segmentation titled All Customers Are Equal, But Some Are More Equal Than Others. I graphically represented the concept of customer segments with a pyramid, because it was a simple and straightforward representation of the concept. When it comes down to actually segmenting your own customer base, though, and making decisions about how to service them, I’ve found the best way to do that is to use a Pareto Chart.

Figure 1: Pareto Chart of 2000 Hypothetical B2B Customers

The Chart Described

If you aren’t familiar with the concept, a Pareto Chart is great way to visualize how your revenue is distributed across your customer base and how much your largest customers contribute to your overall revenue.

The chart above came from a hypothetical set of 2,000 customers I created from data that I made-up to represent a typical B2B customer distribution curve. The grey portion of the Pareto Chart is actually a bar graph made up of 2000 data points in descending order. Each (very thin) bar represents a customer’s Monthly Recurring Revenue (MRR) and maps to the axis on the left – in MRR dollars.

The blue line shows the cumulative percentage of revenue represented by the customer base as it moves along the X axis and maps to the axis on the right – in percentage of total revenue.

Creating Your First Segment

The Pareto chart quickly shows you a couple of things:

How your customers are distributed

How many customers fall into each bucket so that you can efficiently allocate resources to manage a large percentage of your revenue base.

The image below takes this hypothetical (but not uncommon) B2B case and creates a first segment of customers. This segment happens to consist of approximately 10% of the customer base (It’s 200 grey “bars” wide, representing 10% of the 2000 bars in the graph) and approximately 45% of the revenue (the right edge of the green area intersects the blue “% of revenue” line at about 45%). You’ll also see that the MRR value at the right edge of the green area is approximately $5,000 – which represents the minimum MRR for a “Tier 1” customer. Again, these numbers are examples. The process for creating customer segments requires a little art to go with this science and is going to take some iterations to get right; however 10% of your customer base is a reasonable baseline number for a high-touch CSM organization. You may choose to make it larger or smaller for a number of reasons (which I’ll cover in a future post), but this framework is a good way to illustrate it and justify whether you’re covering a reasonable amount of your revenue base.

Figure 2: The First Segment

The Second Segment

Now that you’ve created a high-revenue customer segment that can justify a high-touch CSM, you might want to see whether it makes sense to cover another relatively small number of customers that still might represent significant revenue with a somewhat lower touch, but still personal, approach. Based on this customer distribution, you can see that a second segment can be created that consists of twice as many customers as the first segment, and in combination with the first segment gives you coverage for approximately 75% of monthly revenue.

Figure 3: The Second Segment

Pareto Charts can illustrate pretty clearly how much revenue is represented by each segment of customer as well as show the baseline MRR that can be used to define the “floor” of each segment. Figure 3 shows that in this hypothetical situation, 75% of the revenue is represented by approximately 30% of the customer base, with an MRR of $1,700 and above.

So Now What?

Now that you have a framework for segmenting your customers, you can optimize your investment in your CSM function. In this example, the first segment of customers represents significant revenue that can justify high-touch named CSMs who can engage with customers in a personal, frequent, and customized manner. The second segment consists of roughly twice as many customers and a little over half the overall revenue of the first segment, so the amount of engagement per customer that can be justified for each CSM is significantly lower. The third segment represents approximately 3/4 of total customers yet only 1/4 of total revenue and can be effectively managed with Customer Success Automation and Marketing Automation. I’ll discuss how to address these three very different customer segments in more detail, and how Customer Success Automation applies across all three in a future post.

Last week I was having coffee with a friend who is a technologist with a background in journalism, and he asked me the following question: “Do you think the subscription model is dead?”

I answered in the context of software with “No, I think it’s only starting. I actually think it’s going to eat the perpetual license model for lunch. Why do you ask?”

He answered in the context of media subscriptions with “Well, as good, free content continues to proliferate, then why on earth would people be willing to pay for it?”

Then it hit me (well actually, two things hit me: the first being that I should understand the context of someone’s question before I answer it, but the second one was the bigger “aha”): As much as SaaS companies talk about subscription management, and as much as everyone who gets their news from Twitter (like I do) loves to flog the newspaper industry about its impending death, there’s an incredible lesson here about subscriptions, and I heard myself say it when I answered his second question:

“People will pay for content, or anything, for that matter, as long as the incremental value of that content when compared to the free stuff justifies the expense. Personally, that means I’m willing to spend $99/year on The Economist or Harvard Business Review, but not $23 per month on the Wall Street Journal or $8.75 per week for the NY Times.”

…and the bigger lesson here is that the principle of value holds true across the board in the subscription world, whether you’re talking about software or media, or information. The more what you’re selling becomes commoditized (and information has now become the poster child for commoditization), the more you need to ensure that you understand whether your customers are getting value from what you’re delivering. If they don’t, you need to do something about it, or they won’t be your customers for long.

If you’re an early stage company, you’re likely focused on proving that your solution is better than doing things manually or better than using the solution that you’re disrupting. The role of Customer Success is somewhat “missionary”, just as the sales role is. There’s quite a bit of evangelizing and proving that your solution is better than no solution, and you’re measuring adoption not just for the sake of your product’s adoption, but for the sake of validating that the market sees value in a type of solution like yours. In essence, you’re selling against the status quo.

If you’re a later stage company, on the other hand, your Customer Success function is more focused on proving that your specific product is delivering value and less about needing to convince the marketplace that they need a product like yours. The tricky part for a later stage company, however, is that unless you can differentiate your offering (product and services), you risk being commoditized. And commoditized solutions are very tricky to service because the only differentiator in the customer’s mind is price, and competitors end up trying to poach each others’ customers based on lower prices in a race to the bottom. That’s obviously a really crappy place to be, so if your product doesn’t differentiate itself, you really need to differentiate your solution based on the service you deliver. Your Customer Success mission should achieve the following:

Empower your customers and provide them with value so that they have no legitimate reason to talk to your competitors or question why they’re paying what they are paying for your solution;

Understand which customers aren’t getting value so that your organization can react appropriately. Do this quickly and frequently so that you’re understanding potential customer issues and patterns before they become deep-rooted;

Understand which customers are either strong potential brand advocates or which ones are candidates for additional products or services and use both of those categories of customers to continuously “de-commoditize” yourself.

I guess there’s one more realization that I came to the other morning, which is that I can’t even have a cup of coffee anymore without thinking about Customer Success.

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As the old saying goes: “You only have one chance to make a first impression”. If you want to increase the likelihood of success for the deployment and adoption of software, you need to make that first impression while your customer is still excited about their purchase decision. It holds true for enterprise software, B2C software, and everything in between, even though complexity and timeframes differ for each of those categories. In the world of SaaS, the post-sale journey to adoption and value can make or break a company.

So how do you effectively manage your deployments so that you’re: A) maintaining that momentum; and B) providing a quality customer experience that is helping them get a return on their investment in your solution? A great metric to use is Time To Value (TTV). Every solution is going to have it’s own onboarding process which can be as simple as an in-app wizard or as complex as a data integration and product configuration/customization project done by a Professional Services team. In either case, a reasonable target TTV should be measured in days or weeks (rather than months), depending on the complexity of the product and the onboarding process. Even for complex enterprise solutions, you should create a phased deployment where you can measure initial value in 4-6 weeks. Loss of momentum in an implementation can create an incredible amount of pain for enterprise software deployments. Too often, the perceived/expected value in an enterprise software deployment looks like the Gartner Hype Cycle where customers fall into the equivalent of the trough of disillusionment (and frustration) prior to seeing any value from their solution. There was a surprising amount of tolerance for this in the world of perpetual licenses. In the SaaS world, however, …not so much:

It should really be a much smoother and consistent curve of increased value demonstration (with aligned customer expectations) over time.

So how do you minimize time to value (TTV) for your customers, manage their expectations through the deployment cycle, and avoid the equivalent of the “trough of disillusionment”?

Step 1: Identify the unit of measure for value and set a quantifiable objective

Unless you define a “currency” by which you will measure value, you won’t know whether you’re delivering it. In some cases, adoption/usage may be used as a proxy, but to the extent that you can use a metric that your customer will use to measure the financial impact of your solution, start with that unit of measure. Examples for different types of solutions include:

increased overall revenue

larger basket size (for e-commerce transactions)

higher customer lifetime value

higher conversion rates

quicker time to transaction

lower cost per transaction

Even for a single given solution, different customers may measure value in different ways, so it’s important to connect with them to understand their specific objectives that will justify the time, effort, and funding they’re allocating to your solution. You’re getting their resources because you can solve a problem for them. Figure out how they’re justifying their investment in your solution and use the same currency to measure value.

Step 2: Identify the phases for delivering that value

Even if your solution can provide an order of magnitude return on investment, don’t try to get there all at once. Provide quick wins for your customers by phasing your deployment. Don’t try to deploy to the entire enterprise (or market) at once. Pick a department or small, logical group, where you can prove adoption and value, then continue to move forward with the additional momentum you’ve created from the internal user base you just identified. Your objective should be to get a customer advocate/thought leader to stand up in under 60 days and say “look at the value we’ve gotten from this solution. We need to roll this out to a broader group.” If your strategy is to land and expand, understand that you haven’t really landed until you’ve proven value.

Providing quick wins not only keeps the momentum going, but it also provides a healthy deployment model where you’re interacting with your customer on a frequent basis and continuously validating that you’re proceeding according to plan. Without frequent checkpoints, customer expectations and deployment realities can diverge quickly. The most common reason I’ve seen behind runaway or at-risk projects has been this disconnect between expectations and reality due to inadequate interaction and communication. The longer the time period between conceptual agreement and validation, the higher the likelihood that the end result will not be what the customer expected. Improving Time To Value will increase your chances of success.

Step 3: Execute and Manage(!) according to that plan.

This one might seem obvious, but execution is key. If deliverables aren’t met, understand why… and quickly. Break your implementation process into stages and understand which of the stages are creating friction/delays. In many cases, if you’re suffering from slow deployments, it’s primarily because of one or two key aspects of your implementation process, not all of them. Even in cases where the entire process needs work, by breaking it down into stages and seeing which of the stages are causing the biggest problems, you can quickly understand how to prioritize your activities around improving the deployment process. Customer Success requires constant iteration, listening, and learning from your customers.

In some cases, implementation delays are seemingly due to lack of responsiveness or loss of momentum on the part of your customers. Re-think this problem and see if there’s a way that you can restructure the deployment process so that you’re being more prescriptive for your customers and not requiring them to do things that take so much time and effort. I recently came across one example with a company that provided configuration options for custom reports in their new social analytics product. As part of their implementation process, they would ask customers to provide them with the top 4 items they wanted to see in their custom reports. Enterprise customers would iterate for weeks trying to get internal consensus on those 4 items, delaying the deployment, and delaying the time to value for customers. The solution: create 4 prescribed reports as defined by the implementation consultant, based on their knowledge of the customer as part of Phase 1 deployment; then allow the customer to modify those reports in Phase 2.

Good social networking and B2C companies really get the importance of Time To Value. They’ve sped up adoption and reduced time to value by implementing sign-up wizards as part of the enrollment process. By the time a new customer has finished creating a new account on Facebook, LinkedIn, or Instagram, they’ve been prompted to import contacts from their address book or other social networks in order to be positioned to get value immediately. In a previous life I ran deployments for an enterprise social networking technology and as part of our implementation process, we “bootstrapped” user accounts so that every user had profiles built on Day 1 that incorporated expertise from their previous 90 days of activity. Look at your implementation process to determine whether there are any similar opportunities to prescribe/recommend configuration options to your customers or speed system readiness for your customers.

Momentum is incredibly powerful. By optimizing your deployments for Time To Value, you can maintain, and even increase that momentum to create successful, loyal customer relationships. That, in turn, will lead to a shorter TTR (Time To Reference) …but that’s a whole other metric!

Brian Ascher, a partner at Venrock, wrote a great blog post a while back about how the waterfall model may be the “single best financial reporting tool ever”. That might actually have been an understatement. I highly recommend reading his post, by the way, if you aren’t familiar with a waterfall model and want a good primer as well as the example spreadsheet below.

In a nutshell, a waterfall model allows you to lay out your projections over a period of time (monthly numbers over a one year period; weekly numbers over a year, or daily numbers over a month, for example) and at the end of every period, compare your actuals to your projections then revise your estimates for the periods moving forward based on what you’ve learned. The waterfall model doesn’t provide you with all the answers; however, it gives you a good idea of how you’re doing with respect to your original and revised plans and as a result, figure out what additional questions you need to ask yourself to understand why. It’s an incredibly powerful tool given its relative simplicity.

VCs and Startup CEOs/CFOs have been using waterfall models for decades to measure progress against plan and to help validate assumptions about growth, cash balance, user adoption, and a number of other important business metrics. Outside of the VC/startup/board community, however, waterfall models seem to be underutilized. Maybe it’s because startups need to move quickly. They’re constantly making assumptions, learning, understanding which assumptions were good and which ones weren’t, then revising their plan of attack quickly as they continue to move forward …and a waterfall model helps them understand that and react quickly. There are a few reasons that waterfalls can be particularly helpful in the area of Customer Success as well, given a similar need to move quickly in order to proactively manage recurring revenue:

Reason 1: You need a plan, and you need to know how you’re tracking according to the plan

A waterfall model enforces management to a plan. The interim checkpoints, by nature, hold you accountable to that plan, and if there is a variance, force you to do three things: 1) Acknowledge the variance. If you set up your waterfall model correctly, the interim periods you define should be frequent enough to allow you to take action while there is time to impact the outcome; 2) Ask why there is a variance; and 3) Re-plan the future periods given what you now know.

Reason 2: Your assumptions aren’t always right

Planning, or more precisely, getting a plan right, is an ongoing process. People make plans based on assumptions. Managing an existing customer base can be tricky, and having frequent enough visibility into key metrics in order to take meaningful action allows you to challenge your assumptions with enough time to take meaningful action. One important point to clarify here: This isn’t an opportunity to make excuses for why you didn’t hit your numbers. This is an opportunity for you to understand what you need to do differently to improve your performance (while there’s still time) and create more accurate plans and forecasts in the future. If you do need to re-plan, the waterfall still allows you to measure against your original plan and your revised plan.

Reason 3: Trends are interesting, but without a comparison to your original plan, trends don’t give you the entire picture

Growth is great. Improvements in key metrics are great. In order to run a business and plan/manage it successfully, though, you also need some predictability. Waterfalls provide you with a historical snapshot of how well you did delivering to plan. You always have historical information on your original plan, your re-plan, and your actual performance for each measurable period – in one table. It’s a simple, yet very effective visual tool. If you ended up growing up-sell revenue 25% quarter over quarter is that good? What if your original plan was to grow at 30% QoQ?

So, with all that justification behind us, here’s an example of where and how I’ve used a waterfall model in Customer Success:

Planning and Forecasting Retention and Churn:

I recently blogged about the many Customer Success Automation solutions coming to market to help companies manage a SaaS customer base more effectively. Whether you’re using one of these products or whether you’re just starting to get your head around managing your customer base, it’s very valuable to understand which of the data elements and assumptions you’re using to identify “healthy/reference customers” or “at risk customers” are accurate, and which ones require you to go back and think again.

A team of mine once needed to forecast churn risk from the existing customer base and had very little valid historical information from which we could create projections. We started by looking at customers using broad-stroke definitions of various health levels. We assigned customers a “health status” of Red, Orange, Yellow, and Green, then based on their contract renewal month, assigned a probability of renewal based on that health status. We eventually began adding criteria to more clearly define health status, including usage metrics (not just frequency of logins, but how effectively were they using the system), customer responsiveness, and other indicators of risk associated with their business and usage model. We looked at our first months data and saw where we were off, then went back to our assumptions and looked at where we might possibly have miscategorized customers. We also looked at whether our percentage ratios by health status were accurate (for example, did x% of our “orange” customers actually cancel). We gradually increased our sophistication level as we gathered more data and continued to refine our assumptions in our waterfall model. By the end of our first full year of deploying the model, we were within 5% accuracy forecasting revenue retention and churn.

In addition to forecasting retention and churn, a waterfall model can be useful in other areas of customer success, including:

Planning and forecasting up-sells

Modeling the rate at which you plan on improving service levels and/or resultant customer feedback scores

Planning and forecasting adoption of certain strategic product features across your user base

Pretty much any key metric you want to track and measure against can be managed using a waterfall model. You may want to start with a couple of the ones above, then determine if tracking others will be useful. Just be ready to dig into the underlying data to ask “why” the variances are occurring… and keep asking “why?” until you see patterns emerge. Then act.

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In my last post, I introduced the concept of an Effectiveness Model as a framework for engagement with your customers. I introduced it in the context of four other steps to delivering value, but since it’s so fundamental to value delivery, I’d like to drill down on what it is and why it’s so important:

The Concept

The Concept is straightforward. As a provider of a solution, you should be doing more than just throwing software over the transom to your users. In fact, as a SaaS provider, you need to be proving value to them on an ongoing basis. That’s today’s reality. If you don’t, you risk losing your customers to competitors who will. Harsh, but true. Providing a framework for mapping your customers’ progress, comparing their behavior (and results) to “best in class” companies, and showing a path of progress to best practices will help your customers remain engaged with you. The idea isn’t new. The “Maturity Model” concept has been around for years in a heavier weight format, and while more complex models and engagement levels apply in B2B, B2C solutions can also benefit from defined models that encourage additional types of usage and provide your customers with a roadmap to become more effective at using your product.

In the image above, each box represents a stage in an example Effectiveness Model for CRM. The bullet points next to the boxes each represent behaviors representative of each phase. The process of creating a maturity model for your industry and solution isn’t complicated, but it isn’t just something you can churn out quickly without some careful thought.

Identify 3-5 phases that are indicative of customers’ implementation of your technology. You may want to start with the bookends. For your first phase, identify the basics that someone absolutely needs to implement in order to get value from your application. For your last phase, identify what the absolute, best-in-breed, thought leaders who have, or will implement, your type of technology are doing. Then map out 1-3 interim phases that are indicative of how companies would progress through the phases. The CRM Effectiveness Model I put together above is an example of what that might look like.

The concept is simple. Getting it right, however, will take iterations, critical review, and more iterations.

The Name (Effectiveness vs Maturity)

While “The Industry” has traditionally referred to models like this as Maturity Models, I’ve stopped using that term in customer interactions and internally. I was once in a meeting with a large, strategic enterprise customer and presented the concept of a “Maturity Model” that my team and I had created. I thought nothing of it for a split-second, as these types of things had been called Maturity Models for years. My team and I had spent a good amount of time developing and iterating on a model specific to my company’s industry and showed them characteristics of “mature” vs “less mature” companies. As I listened to the words come out of my mouth, however, and observed my customer’s body language, I realized that the term “maturity” sounded arrogant and condescending. From that point on, I’ve referred to these as Effectiveness Models given that we’re simply trying to make our customers more effective. It’s ok for me to use the term “maturity” when talking to my kids about assuming more responsibility as they get older. It isn’t ok for me to imply to my customers that they are immature because they aren’t using automation and deep analytics. Trusted advisor trumps arrogant vendor. Every time.

Giving Context to Your Customer Communications

Your customers are busy. They’re struggling with priorities just as you are. Whether you know/like it or not, you’re competing for their attention every time you reach out to contact them. I think any customer facing team needs to be aware of two golden rules: 1) Make sure the customer goes in to the call looking forward to getting value from their interaction with you; and 2) Make sure you’ve delivered that value by the end of the interaction so that they are looking forward to their next meeting with you. An Effectiveness Model sets you up for success. Your conversations with your customers are framed around objectives that you’ve set out with them. Your standing meetings and conversations with them can then be framed around what they’re doing (and how you can help them) to make progress.

The Value of Demonstrating Progress

There’s always a need to justify ROI, and to the extent you can do it with hard data, by all means, continue to do so in a way that is meaningful to your customers: Point out how many transactions they’ve performed in your system; if there’s a way of quantifying end objectives, like e-commerce transactions that have resulted from use of your application, then be sure to communicate those. In addition to those concrete numbers, or in cases where the concrete numbers are difficult to capture, it’s important to show your customers progress towards stated objectives. The Effectiveness Model provides a picture and path with clearly defined behaviors and objectives to map that progress. You can use this as a way to both map progress over time as well as identify activities and strategies to achieve the next phase of Effectiveness. Demonstrable progress, together, is a great foundation for a loyalty-based relationship.

An Opportunity to Position Key Features of Your Solution

As you create your industry/company’s specific Effectiveness Model, you have an opportunity to define how key features in your product can help your customers advance along the model. Be extremely careful, however, to avoid being overly self-promotional here or to “force-fit” your features into the model. An Effectiveness Model is just a tool to help advance a trust-based relationship with your customer. The model needs to be genuine and in your customers’ best interests. The reality is that if you have a great product and if you understand your customers, you can make some wonderful, insightful recommendations for them that will provide them with significant benefits, increase their use of your product, and make them more loyal in the process.

If you’ve been using an Effectiveness Model with your customers, I’d be interested in hearing about your learnings and feedback from them. If not, what have been your obstacles to developing one? Send me a dm on Twitter: @nfranco. Thanks!